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Nifty 50 Vs Nifty Next 50 Vs Nifty 100 - Pick Your Large Cap Index

equity market

10 Jun 2024

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Introduction:

With the Indian economy consistently expanding, investing in large-cap companies can be a great idea at this time. Doing so can bring significant returns in the medium-to-long-term investment horizon. You can either go for equity mutual funds that predominantly invest in the stocks of large-cap companies or you can directly buy such stocks from the exchanges.

But before you start investing in large-cap companies in India, you must know about Nifty 50, Nifty Next 50, and Nifty 100. While all three are Nifty large-cap indices, they are pretty different in terms of composition and significance.

This blog compares and explains all three indices to help investors make the right investment decisions. Keep reading.

Understanding Nifty 50 – The leading benchmark index in India

The Nifty 50, often referred to simply as the Nifty, is India's leading benchmark index. It comprises the top 50 companies (in terms of market capitalisation and liquidity) listed on the National Stock Exchange (NSE). These companies represent various sectors of the Indian economy, including banking, Information Technology (IT), consumer goods, and more. The Nifty 50 is widely tracked by investors, fund managers, and analysts as a barometer of the Indian stock market's performance.

The key characteristics of Nifty 50 include:

Tracks the performance of the top 50 large-cap companies in India
Includes companies from multiple sectors
Exerts significant influence over market trends

Understanding Nifty Next 50 – The bench strength of the Indian stock market

The Nifty Next 50 consists of the next 50 companies by market capitalisation after the Nifty 50. These companies are often referred to as 'up-and-coming' or 'emerging' because they have the potential to become future leaders in their respective industries. While not as large or established as the Nifty 50 constituents, the Nifty Next 50 stocks offer exposure to a diverse range of sectors and growth opportunities. This index serves as a bridge between large-cap and mid-cap segments of the market.

The key characteristics of Nifty Next 50 include:

Though not as large as Nifty 50 constituents, these stocks boast significant growth potential
Nifty Next 50 stocks typically possess higher volatility than Nifty 50 stocks
Includes companies from swiftly expanding sectors

Understanding Nifty 100 – A comprehensive overview of the Indian stock market

The Nifty 100 index combines the Nifty 50 and the Nifty Next 50 stocks and offers a more comprehensive view of the Indian equity market. By including the top 50 and emerging companies, the Nifty 100 provides exposure to a broader spectrum of stocks across various market capitalisations. This index is particularly attractive to investors seeking diversification and a balanced portfolio across different sectors and market segments.

The key characteristics of Nifty 100 include:

Comprises the stocks of Nifty 50 and Nifty Next 50
Can be highly volatile and risky at times
Offers stability and diversification across various sectors

Nifty 50 vs Nifty Next 50 vs Nifty 100

Let’s compare Nifty 50 with the Nifty Next 50 and Nifty 100 based on some crucial parameters:

Market capitalisation

The Nifty 50 comprises the top 50 companies listed on the NSE, followed by the Nifty Next 50 and then the Nifty 100. The stocks in the Nifty 50 are the big players in their sectors while those in Nifty Next 50 are the next-in-line companies.

Risk and return

Generally, the Nifty 50 index tends to be less risky than the Nifty Next 50 and Nifty 100. The inclusion of smaller companies in the latter two indices can increase risks and the potential for higher returns over the long term.

Historical performance

Historically, the Nifty 50 index has delivered consistent returns over the long term, given its focus on established large-cap companies. The Nifty Next 50 and Nifty 100, while potentially more volatile, have the potential to outperform the Nifty 50 during certain market cycles, especially during periods of economic expansion.

To conclude

Each of these indices – Nifty 50, Nifty Next 50, and Nifty 100 – offers unique opportunities and advantages based on your investment objectives, risk tolerance, and time horizon. While the Nifty 50 is the benchmark for large-cap investing in India, the Nifty Next 50 and Nifty 100 provide avenues for diversification and exposure to emerging companies.

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